Cenovus TL ULC Telephone Lake Project Volume 1 – Project Description December 2011

EXECUTIVE SUMMARY

Purpose Cenovus TL ULC (Cenovus) is seeking regulatory approval to construct, operate and reclaim the Telephone Lake Project (Project). The application for approval of the Project is being submitted as an integrated application to Environment and Water (AENV) and the Energy Resources Conservation Board (ERCB) pursuant to their joint Memorandum of Understanding on the Regulation of Oil Sands Developments (Informational Letter IL 96-7) and in accordance with the Oil Sands Conservation Act (OSCA) and the Environmental Protection and Enhancement Act (EPEA). Cenovus will develop, manage and operate the Project and will hold the operating approvals for the Project.

The Project is located approximately 90 km northeast of the Urban Service Area of Fort McMurray, and approximately 70 km due east of the Hamlet of Fort McKay, in the Regional Municipality of Wood Buffalo, in northeastern Alberta. Administratively, the Project location falls within Alberta’s Lower Athabasca integrated planning region. The Project location is shown on Figure 1 and is represented by a Proposed Project Area (PPA), which outlines the boundary within which surface and subsurface development is anticipated to occur over the life of the Project.

The PPA encompasses all of Cenovus’s lease holdings in Township 093-03W4M, virtually all of Cenovus’s lease holdings in Township 094-03W4M, and a portion of Cenovus’s lease holdings in Township 095-03W4M. Initial development within the PPA will take place in areas where the delineation well density will be 16 wells per section, or where the delineation well density is eight wells per section accompanied by three-dimensional seismic. Sustaining development within the PPA will require further delineation drilling. A detailed Project layout within the PPA is shown in Figure 2.

Scope of Project Cenovus plans to recover bitumen from the McMurray Formation using steam assisted gravity drainage (SAGD) and Cenovus’s patented Wedge Well™ Technology. The Project is expected to have an oil production capacity of 14,308 cubic metres per day (m3/d), or 90,000 barrels per day (bbl/d), in two phases (Phase A and Phase B), with an estimated operational life of approximately 40 years. This application requests approval for both Phase A and Phase B.

Within the PPA, the bitumen zone in the McMurray Formation is typically overlain by a layer of non-saline groundwater (top water). The Project will utilize dewatering technology (Cenovus patent pending) at the majority of the well pads to facilitate the replacement (with air) of a portion of this top water prior to SAGD operations. Dewatering technology involves additional wells and well pads beyond a typical SAGD project; where required, these additional wells and well pads would be in operation one to two years prior to the first steam injection for SAGD.

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± S:\Gis\Projects\CE\Cenovus\CE0339901_TelephoneLake_EIA\ArcGIS\ApplicationReportFigures\Executive Summary\Fig02 A PPA Layout.mxd Source:Cenovus, Spatial Data Warehouse Ltd. Legend 1012 Watercourse Open Water Proposed Project Area Telephone LakeTelephone Project 3 0.5 Cenovus TL ULC 34 27 22 15 10 34 27 22 3 15 10 3 Kilometres 1:110,000 2 35 26 23 14 11 35 26 23 2 14 11 2 Project Layout 1 RGE RGE 4 3 RGE 36 25 24 13 12 36 25 24 1 13 12 SAGD/Dewatering Only SAGD ROW Project ROW Main Access Laydown Disposal Dewatering Camp CPF Pit Borrow 1 TLS14 1 TL19 TL23 TL65 6 9 Telephone 6 Layout ofProject Facilities 31 30 19 18 31 30 7 Lake 19 6 18 7 6 TL105 TL08 TL53 TL64 TLS31 TLS23 TLS17 10 TLS04 TLS33 3 TL29 TL13 9 TL87 TLS11 TLS28 TL06 TLS09 5 TLS02 TL78 TL89 32 TL41 29 TL05 20 17 32 29 8 20 5 17 TL88 8 5 TL47 TLS16 8 2 TL70 TLS22 TLS08 TLS20 3 TL81 TLS19 TL61 TLS10 4 TLS12 33 28 21 16 33 28 9 21 4 16 9 4 TL85 TL84 TL07 TL51 TL67 TL96 TLS25 1 2 2 5 TL26 TLS01 7 TL95 TL83 TL14 TL79 8 4 TL63 TLS15 TL101 TL99 TL32 TL31 3 5 TL18 34 27 22 15 10 34 TL20 27 3 22 15 TL16 10 34 3 TL103 TL34 TL72 7 TL04 TL93 TL01 TL77 TL74 TL02 TL55 TL46 1 TL24 TL28 TL56 TL48 TL91 TL73 TL40 2 6 35 26 TL90 23 10 14 11 35 26 2 23 14 ANALYST: PROJECT: DATE: 11 TL12 35 4 TL39 2 TL59 TL21 KW CE0339901 December 2011 TL44 TL25 TL17 1 TL106 TL75 QA/QC: TL50 KW TL97 1 RGE 3 RGE 2W4 RGE RGE 3 36 25 24 13 12 TL49 36 25 1 24 13 12 36 1 REH LR 4 2 3 6 31 30 19 PROVIDED BY: PROVIDED PROJECTION/DATUM: 18 31 7 30 6 19 18 UTM Zone 12 NAD83 12 Zone UTM 31 7 6 AMEC Fig02 ProjectLayout 11-11-7 5 32 29 20 17 32 8 FINAL MAPPING BY: 29 5 20 17 32 8 5 AMEC 4 33 28 21 16 33 9 28 4 21 16 33 9 4 Figure TWP 92 TWP 93 TWP 93 TWP 94 TWP 94 TWP 95 2 ± 34 F i Cenovus TL ULC Telephone Lake Project Volume 1 – Project Description December 2011

In November 2011, Cenovus received approval from AENV and the ERCB to conduct a test of the proposed dewatering technology, and Cenovus intends to conduct this test over a period of six to twelve months commencing in 2012. A report of the results and conclusions of this test will be submitted to AENV and the ERCB as an addendum to the application for the Project within 120 days of the conclusion of the test.

The application also requests blanket approval and/or flexibility to use the following technologies and design/operational parameters during the Project: cold water dilation enhanced start-up, steam dilation enhanced start-up (patent pending), solvent-enhanced start- up operations (Cenovus patent pending), Wedge Well™ Technology, well pair spacing ranging from 50 to 200 m, well pair lengths up to 1,200 m, and two operating pressures—a high pressure based on specific well parameters during the start-up stage, and a lower limit based on field-wide maximum operating pressure there afterwards.

The Project is expected to include the following facilities: • a central processing facility consisting of: ‰ oil treating facilities to create a maximum oil treating capacity of 14,308 m3/d (90,000 bbl/d); ‰ steam production facilities, with up to ten boilers (including six once-through steam generators (OTSGs), two OTSGs in reboiler configuration, and two heat recovery steam generators (HRSGs), with each HRSG being paired with a separate 40 to 50 megawatt gas turbine; ‰ water treatment facilities; and ‰ sulphur removal facilities • dewatering facilities, including centralized air compression and water treatment facilities along with air injection, water injection and water production wells at various pad locations; • an estimated total of 104 well pads over the Project life, consisting of 36 SAGD-only well pads, 54 SAGD well pads including dewatering wells, 10 dewatering-only well pads, and four water disposal pads; • an estimated total of 961 SAGD well-pairs and 378 dewatering wells, the latter to include air injection wells, water production wells and water reinjection wells in various configurations to optimize dewatering; • an estimated total of two fresh water source wells for domestic use; and • an estimated total of ten remote water disposal wells, five for excess process wastewater and five for reinjection of excess top water from the dewatering process.

The Project will require additional infrastructure, including electrical power lines, an all-weather access road, a fuel gas pipeline, a diluent supply pipeline, and a produced sales oil pipeline. These infrastructure items will be applied for separately, as appropriate.

Executive Summary – Page 4 Cenovus TL ULC Telephone Lake Project Volume 1 – Project Description December 2011

Schedule The Project timeline depends on regulatory approvals, market conditions and corporate sanction. Once corporate sanction and regulatory approvals are received, construction will commence and is expected to last for up to 72 months, followed by an operational life of approximately 40 years (Table 1).

Table 1: Project Schedule

Activity Phase A Phase B Public Consultation Ongoing Ongoing Project Application Submission Q4 2011 Q4 2011 Regulatory Approval Q4 20131F Q4 20131F Start Field Construction 20141F 20161F Commissioning/Start-Up (First Steam) 20181F 20191F Start Pad Reclamation 20301F 20321F Start Decommissioning 20581F 20581F

1 Target date based on conceptual schedule. F Forecast. Q4 Fourth quarter.

Public Consultation Cenovus’s consultation has followed Alberta’s First Nations Consultation Guidelines on Land Management and Resource Development. Cenovus initially developed a Consultation Plan in 2007 using these guidelines, and this plan was approved by AENV. Early in 2010, Cenovus revised its Consultation Plan based on input received during a meeting with AENV, Alberta Sustainable Resource Development and the Canadian Environmental Assessment Agency on the topic of Aboriginal consultation. The input from this meeting was incorporated into the consultation efforts Cenovus undertook for the Project.

Cenovus believes the Project will not create any adverse impacts to public stakeholders, or to the Treaty or Aboriginal rights of Aboriginal communities, that cannot be mitigated. Cenovus will continue to work with potentially impacted stakeholders to identify and mitigate any potential effects of the Project through continued discussions and agreements. The Aboriginal community and public stakeholder engagement and consultation plans will be reviewed and updated as required during the life of the Project.

Environmental Impacts A detailed environmental impact assessment (EIA) has been conducted for the Project, including assessments related to air quality, noise, groundwater, surface water, terrestrial, aquatic, human health and socio-economics. The EIA has highlighted information regarding water supply, air emissions, health, wildlife movements and employment. The EIA has revealed environmental effects to be within accepted limits, provided appropriate mitigation and monitoring measures, as outlined in the EIA, are undertaken.

Executive Summary – Page 5 Cenovus TL ULC Telephone Lake Project Volume 1 – Project Description December 2011

Project Benefits In addition to meeting the resource recovery objectives specified in the OSCA, the Project offers the following economic benefits: • the Project will provide economic benefits to the Regional Municipality of Wood Buffalo , the Government of Alberta, the Government of , local area residents and other stakeholders in the region through Project expenditures, employment, taxes and royalties paid; • total capital expenditures expected up to, and including, start-up of Phase B of the Project, amount to almost $3,000 million in 2011 dollars, while operating expenditures will be an additional $440 million annually; • in excess of two million man hours will be required for construction of the central processing facility and off-site facilities, and for drilling and completion of the initial wells; and • on an annual basis, operations and maintenance of the 14,308 m3/d (90,000 bbl/d) facility will require the equivalent of approximately 335 full time equivalent workers on site (staff and contractors).

Executive Summary – Page 6